Govt keen to reform pensions

Social services minister Scott Morrison is seeking to persuade crossbench senators to support changes to pension indexation.

The government is seeking to entice Senate crossbench support for changes to pension indexation, proposing a new three-yearly review of pension adequacy – which it could still ignore.

Social services minister Scott Morrison said age and other pensions would be indexed twice a year according to the consumer price index (the inflation rate), with the review conducted thrice-yearly to ensure pensions kept up with community living standards.

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He said that review, conducted by an independent panel and tabled in parliament, would provide a safety net for pensions beyond the CPI increases.

But there would be no obligation to act on its recommendations.

“This would be a matter for the government of the day because the government of the day has to be able to consider the broader fiscal issues at play here,” he told reporters in Sydney.

In last year’s budget, the government proposed changing the pension indexation to reduce long-term costs. That’s vehemently opposed by Labor and now stalled in the Senate.

For it to pass in the face of Labor and Green objections, the government needs the support of at least six of the eight crossbench Senators.

Pensions are now indexed every March and September to the higher of the CPI or male total average weekly earnings. The government wants to index only by CPI, mostly lower than MTAWE and now at 1.7 per cent.

Mr Morrison said 2.5 million Australians were receiving pensions, which cost about $40 billion a year. That’s set to rise to almost $70 billion a year in a decade.

He said the government wanted to ensure the pension safety net remained for future generations.

“If you just keep going with the pedal to the metal, you will race if off the edge of the cliff,” he said.

Mr Morrison declined to say how the crossbench senators had responded to his overtures.

“It’s a worthy option to continue to discuss. Where we end up, well that’s a matter for the crossbench,” he said.

Labor families spokeswoman Jenny Macklin said the opposition wasn’t about to budge on changes to pension indexation.

She said the Australian Council of Social Service had calculated pensioners would be $80 a week worse off in a decade if the indexation was changed to CPI.

“We do not want to see any mean or tricky cut to pension indexation. This idea of a review will not guarantee that pensioners maintain their decent standard of living,” she told reporters in Melbourne.

Prime Minister Tony Abbott said this showed the government was serious in trying to get this reform through parliament.

He said pensions would still rise twice a year and over the long term the rate of pension growth was expected to be lower.

“We have put a proposition on the table. It’s a tough proposition but I believe it’s a necessary proposition,” he told Sky News.

Mr Abbott said in order to keep paying pensions the system had to be sustainable.

“At the moment there are about five working age people for every retirement age person,” he told Sky News.

By 2055, there would be less than three working people age people for every retirement age person.

That was unless changes were made, including raising the pension age and changing pension indexation.


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